If there are two essential financial statements that you would often receive from a bookkeeper, these are going to be the Profit & Loss Report and Balance Sheet. Business owners rely on these statements because they show the financial status of the business. Your bookkeeper interpret the figures and explain the how’s and why’s of the figures, but as a business owner, you remain clueless.
It is important that you know how to interpret these figures because they can help you monitor your business performance and make a sound decision. Your financial planners, bookkeeper and financial advisors will also have an idea of the business approach to use.
In a balance sheet, you can find the assets, liabilities and equity. Your assets include the items you own and the liabilities are the payments that your business owes. The difference is called equity or net worth. If you are looking for a comprehensive report that will help you tell the key performance indicators of your business, a Balance Sheet is a good financial statement you can refer to. With the use of a Balance Sheet, you will know the return on equity, financial strength, control of working capital and return on capital.
It may take a while before you completely understand a Balance Sheet because of all the technical terms you can find in it. When tracking liquid items, bookkeepers and business owners refer to Current Assets and Current Liabilities. You should be watchful of these amounts because they can help you make the right decision and manage your cash-flow. With the use of bookkeeping software, preparing a Balance Sheet regularly is easy.
If you want a summary of your business expenses and income, a Profit & Loss Report can provide you the information you need. It gives you an indication of your business’ performance. The report shows the sales, cost of goods sold, gross profit, expenses, operating profit before tax, tax payable and net profit. With a skill developed over time, you will be able to interpret the figures found in a Profit & Loss Report. The gross profit is one of the key elements of the report and it is expressed as a percentage. The Gross Profit Margin is important because it enables you to track your business’ profitability and compare figures with your competitors.
If there is a decrease in the Gross Profit Margin, it could mean an increase in inventory costs, heavy discounting or turning over profits with low margins. The Net profit Margin is measured as a percentage. A Profit & Loss Report must be prepared every month especially if your business is using bookkeeping software. If you practice regular analysis of your business, you will be able to unlock key business drivers. As a result, you will be able to determine the correct pricing, target shrinkage and even control costs.
It may take time before you can master interpreting these financial statements but once you know the significance of these figures, you can easily determine where your business is going. You can also create an effective business planning that increases the chances for success.
If you want to keep track of the time you spent on a particular task, time tracking is the way to go. Not only does it provide you greater peace of mind when it comes to estimating how much time you are actually spending on a specific task, you will also have the ability to adjust the pace in case you think your progress slows down. Time tracking is not just about getting the job done as fast as you can, it is also about accomplishing your projects in a timely and efficient manner. A time tracker is beneficial to both clients and employees because aside from its effective way of tracking the amount of time spent on various projects, time tracking applications are also downloadable regardless of the device you have.
• You get accurate information of the time you spent.
Have you ever experienced losing track of time as you were engrossed in accomplishing a task assigned to you? As a bookkeeper, there are instances when you need to get the job done quickly so you can accommodate other tasks at hand. While most bookkeepers are compelled with multi-tasking, quality usually takes a backseat. With time tracking, you will be able to know the amount of time you need to finish a specific task without sacrificing quality. When you are keeping track of time, you can also pay attention to other crucial tasks such as invoicing, outsourcing and quoting. When you have an accurate account of your time, you will also improve your overall efficiency.
• You become more efficient as an employee.
How many times have you caught yourself getting side tracked by social networking sites while letting an important task wait? When you are not focused on your task, you find it easy to check out post updates without realising that you are already wasting your time. However, if you have a time-tracker, you can stay focused on your task and set aside less important matters such as unnecessary web browsing. You can greatly improve your efficiency this way. You can also check actual time instead of ideal time. When you keep on challenging yourself, you are more likely to complete the task efficiently.
• It is easy to outsource task to somebody else.
If you can easily identify where your time is allocated, you can determine whether or not you need to outsource the task to others. If you used to have difficulties completing certain tasks because you are unsure of the time you allocate, a time tracker can help you resolve such difficulties. You can also evaluate the time spent and determine if you are working efficiently. You can also use time tracking as a guide for booking other people to get the job done.
• It reveals hidden time.
When you make it a habit to track your time, authenticity and integrity are ensured for both employees and client. No time will go unnoticed and you prevent multiple revisions and intensive project management.
When it comes to business management, your business’ financial aspect requires attention and while bookkeeping and accounting fees are quite high these days, ensuring quality is going to be the best practice to follow to avoid experiencing poor bookkeeping. Just imagine operating your business without paying attention to your financial activities. You had high hopes that your cashflow is still intact but when you received a letter from the ATO reminding you of your delayed or non-payment of GST and PAYG, everything will surely sink in that you need to recheck your bookkeeping task.
You worst fear has finally come true as the ATO forwarded the letter to your bank informing them of your non-payment. It was too much to take and you are well-aware of what is going to happen next. You panic at the thought of your bank receiving the letter from the ATO. You are restlessly waiting for the bank manager to call and demand of a good explanation for your non-payment.
Being in the business requires you to keep watch of your cashflow from a bird’s eye view. For the most part, business owners rely on bookkeepers when it comes to ensuring that their financial activity is kept in check. However, your business is doomed to fail if you do not take an active participation in the process of checking your financial statement. As a result of non-payment of GST and PAYG obligations, the ATO is left with no choice but to garnish the company’s bank account.
The sad truth about mismanaging a business is the failure to pay attention to their operating expenses and wages bill. It seems too easy to request the ATO to defer payments, but if this already becomes a habit, it is definitely difficult to catch up. Once a business is in financial distress, making a payment of debts is a challenge. If paying debts is not definite, insolvency is not far from happening and bankruptcy is inevitable.
Even the hardest working people are not immune to financial stress and there are things beyond a business owner’s control. If you have a business partner and he is not doing his part in managing the business, it can also take its toll on your business.
• Can you still meet the contractor’s bill and payroll?
• Are you making timely GST and superannuation payments?
Timely management reports should be prepared by your bookkeeper so you will be able to keep watch of your business. Bookkeepers should meet the following obligations for a cost effective way of handling your business:
• Create a system so invoices go out promptly and reminder notices are sent effectively to avoid falling behind payment schedule.
• Prepare a system that has the ability to highlight late payers once due dates are triggered.
• Terms on invoice should also be set up so it will be easy for you to find out about your collection costs.
As a business owner, it is also your responsibility to call the bank manager before he calls you, give the ATO a call, arrange payment plan that you can follow, prepare budget and reduce head-count if it is considered necessary.
Have you ever wondered why your bookkeeping woes just don’t seem to end? There might be one aspect of your business that you may have forgotten to pay serious attention to. Although preparing financial reports is your bookkeeper’s job, it is still necessary that you understand the importance of various bookkeeping documents. If those statements leave you confused whenever your bookkeeper presents them, it is a clear sign that you need to seriously consider gaining basic understanding of the documents. You may not be as well-versed as your bookkeeper, but having an idea about the purpose and how you can use them will help you understand the financial information that your bookkeeper gives you.
The Cash Flow Statement is intended for presenting the movement of your assets. The main purpose of the statement is to demonstrate which direction your assets are going. There are three movements that the statement is broken down into: operating, investing and financing activities. Operating activities refer to the activities that the business performs. Making a sale is an example of operating activities. The investing activities refer to the purchase and sale of various assets and an example is buying a new location. Financing activities include paying or generating debt.
The Income Statement provides a summary of your business’s profits and losses for the current period. It also shows the business’s income and the sales revenue. You can also find the expenses of your business such as the wages and rent in the income statement. In order to find the net profit or net loss, the bookkeeper has to find the difference between the expenses and the income. Business owners often expect to find a net profit on this type of statement.
If bookkeepers want to provide advice or recommendations, this is the statement they will get references from. The bookkeeper will obtain information about the status of your business and the steps to take to make it more profitable. As a business owner, you will be able to know whether or not your business is doing well.
The balance sheet is an important bookkeeping document because it shows the amount of money you currently have. However, you should keep in mind that your specific investments are not taken into account. Compared to most accounting or bookkeeping statements that focus on every financial detail, the balance sheets only show the business’s overall success.
The balance sheets are also referred to as statements of financial position and they are considered bookkeeping’s building block. If there are additional statements that need to be created, the balance sheets are going to be essential so final conclusions can be drawn. In fact, other statements obtain information from the balance sheets.
More often than not, there are three essential elements that can be found in these balance sheets: liabilities, assets and equity. The liabilities refer to the items that your business owes such as loans. Assets include business-controlled items such as machinery and cash. The equity refers to the capital left after the assets have been used to settle liabilities. The balance statement also shows that the business’s assets are equal to the sum of both the equity and liabilities.
When discussing your expectations with your bookkeeper especially in terms of the kind of task you want accomplished, it is important that your expectations are reasonable. It is easy to raise the bar when it comes to hiring a bookkeeper, but you will not get the results you want if you always put pressure on your bookkeeper.
For your business to prosper, with the help of a bookkeeper, you need to know their duties and responsibilities. From there, you will be able to set your own boundaries and adjust to your bookkeeper’s pace. You cannot expect results when you are asking too much from your bookkeeper.
• Pay more attention to details. When dealing with numbers, it is important that bookkeepers are accurate with the information they provide you because it is easy to overlook these details. When your bookkeeper is paying serious attention to the data on your statement, it only goes to show they are detail-oriented.
• Be well-versed in accounting. Your bookkeeper should also have the ability to explain the details in much simpler terms so you will be able to understand the information.
• Make realistic suggestions. The statements bookkeepers make play an important role when it comes to giving you some recommendations on the actions you need to take for your business to have significant improvements.
• Be able to work without giving you a feeling that you need to remind them you exist.
• Have the ability to follow through. A bookkeeper should meet deadlines and accomplish goals that you set.
• Prepare a cash flow statement, balance sheet and statement of profit and loss on a monthly basis. These essential bookkeeping statements must be provided to you following a consistent deadline.
• Stick to their commitment. A reliable bookkeeper should provide a financial report in a timely fashion.
• Provide a reasonable price for the service. Bookkeepers who have substantial knowledge about their job will have an understanding of the service cost.
• Have a deeper understanding of the bookkeeping industry and the type of business they work for. Bookkeepers do not only concentrate on generating financial reports and interpreting figures. They are also known for providing advice and recommendations to business owners. Before you consider hiring a bookkeeper, make sure the company they are connected with has substantial experience dealing with various business industries.
• Know the ins and outs of bookkeeping software such as Reckon and MYOB. A bookkeeper must be computer literate for these duties to be executed properly.
• Have solid communication skills. Business owners communicate with their bookkeeper through emails, phone calls or even one on one conversation.
However, business owners can also lean towards embracing unrealistic or unreasonable expectations, oblivious to the fact that they will eventually breed frustration. It can still be avoided by ensuring that the business owner is clear with his or her expectations. It is unreasonable to expect a bookkeeper to stay in constant communication, answering your emails within minutes. It is also impossible to get a bookkeeper that will nod along with whatever they are told to because this can wreak havoc on your business as a result of business biases. A strong connection with your bookkeeper paves the way to a better professional relationship.
Habitual neglect of bookkeeping duties eventually affect the overall performance and condition of your business. One neglect can form into a habit, which triggers red flag.
Every business needs to get detailed information about monthly reports. If your bookkeeping is late and inaccurate, the negative result will no longer come as a surprise because you failed to set due dates and deadlines. You need to know when reports will be delivered. You do not want to take a wild guess which direction your business is going don’t you? Plus, ATO can chase you for all your late payments.
A piece of paper can turn into one of your worst nightmares when the ATO comes knocking on your door. It is highly recommended that you organise and keep receipts for up to 5 years. If you have stacks of invoices on your desk, not knowing what to make of them, you need to start including ‘organise’ in your vocabulary.
The world of payroll management can be complicated that you might find yourself completely alienated by the process. Get someone to manage your payroll taxes to spare yourself form the headache of dealing with it. However, do not go totally hands-off as you still need to check if your bookkeeper is doing things right.
The only thing constant in this world is change and keeping up with the changes in technology is the only way to stay relevant. Your bookkeeper may still be spending hours burying their heads in stacks of papers when there are easier and faster techniques to run a report. It could have been done better, had you thought about giving your bookkeeper a regular training on the latest bookkeeping regulations and cloud software.
What better way to manage data than utilising cloud technology? Business owners are plagued by financial reports because the process that running them entails can be quite tiring. This is where data synchronisation becomes necessary because it reduces error and even improve your time management. What’s not to love?
The reason for standardising your financial report processes every month is to ensure that you run the same report on a monthly basis. Standardised reports ensure you track your financial data effectively.
Your business may generate profit, but without a steady flow of cash, the money in your business is still not enough to shoulder monthly expenses. You should know when you will get paid because monthly expenses do not have a ‘pause’ button. You will continue to pay for them regardless of your financial condition.
Small and big businesses alike are vulnerable to fraud. Blank cheques and fake invoices are evidences of fraud.
As a business owner, the first step to preventing fraud starts with knowing the methods employees use to execute a fraudulent activity. Stealing can be done in many ways and one of which is by placing inventory in garbage bins as a way of hiding stolen objects. Employees can resort to this extreme and desperate measure to steal.
Another cause for concern is when you see a bank statement addressed for a friend or a bookkeeper, but not your vendor. Sure you can consider one mistake as due to incompetence, but if it happens habitually, you know that something is cooking.
A business owner may think that bookkeepers just do not know what they are doing, but there are telltale signs that you should look out for to determine if there really is a case of fraud. If a bookkeeper takes time off, and cannot deliver monthly reports, you know that you need to conduct an investigation. It is very unlikely for bookkeepers to not have the ability to match accounts receivable and accounts payable to the balance sheet considering it is their job.
Not generating an updated financial report raises questions because this is one of the important tasks that a bookkeeper should carry out regularly. There can be some lame excuses such as faulty software or the lack of resources to reconcile a bank account.
Bookkeepers must be given deadlines as a way of preventing unusual activities. Reports must be delivered to you after month-end and reviews must be done on a monthly basis.
It would also be helpful if you separate bookkeeping duties of your business. Assign a person to enter the bills, and another for paying the bills. There should also be an evidence of financial transactions made. For instance, employees should attach cheques to invoices so you can monitor where the money is spent. Do not forget to sign all your checks as well.
You will also have to perform physical inventory checks. It is important for employees to be aware that you are monitoring transactions. Ask questions and get regular updates from your bookkeeper. It is easy to overlook these things if you remain complacent about your business activities. Do not wait for the time when you have to look over your shoulder as paranoia has already feasted upon you. If you suspect that your employees are engaging in fraudulent activity, act swiftly before matters could get worse.
Have you ever wondered why some businesses fail? It can be due to poor financial health, which is known to be a major contributor to small business failures.
If your bookkeeper is not performing the tasks efficiently, inefficiency can impact your financial health. In the digital era, small business owners have the option to make bookkeeping task easier through automation. If you need to check an updated financial report, automation will make information available in real time.
Manual tasks are time-consuming and repetitive. They also demand greater workforce and skilled manpower. However, even trained manpower does not guarantee an error-free report. Automation helps your business put things in proper perspective. The process is capable of correcting bookkeeping mistakes, which are committed repeatedly due to constant human interaction. Automation helps you to avoid these 5 mistakes:
Every business transaction must be recorded for a good reason: your business is dependent on your cash flow. Whether you are tracking sales or expenses, it is important that every transaction made is recorded. If you miss tracking your expenses diligently, you may end up covering expenses using your own funds.
For a business that is just starting up, hiring a trained and experienced bookkeeper will only incur higher costs. However, a bookkeeper who is equipped with knowledge in using automated tools can ensure that your books are updated and your expenses tracked.
Business owners cannot afford to miss this task because it is a critical step in every bookkeeping process. A small bookkeeping error can snowball into larger mistakes if your bookkeeper does not pay heed to this process. Automation reconciles business books with card and bank accounts so you will know if there are discrepancies on the report.
A business can lose vast amounts of money due to fraud. Fraudulent activities can be deterred if human interaction is reduced. Automation has a huge impact on the profitability of your business because it reduces dependency on manpower. As a result, you are also reducing the chances of committing fraud. Automation can easily spot discrepancies or incorrect details on your financial report.
Whether you want to invest or grow your business, the decision you make will depend on your cash flow. Every business should manage cash flow because it is also utilised for paying monthly expenses. A profitable business may not be considered successful without a steady flow of cash. Automated bookkeeping provides updated records of balance and withdrawn funds so you will have an overview of your cash flow.
Getting all the tax details in order can be a difficult tasks if the tax return deadline is quickly approaching.
However, this is not an excuse to miss the deadline because it can result in incurring penalties. Following great practices can help you file your tax return in a timely fashion. It only takes 5 steps to ensure you do not miss the tax filing deadline.
Incorrect statements may be one of the reasons you miss tax filing deadline. You can still do something about these discrepancies by putting some pressure on your bookkeeper to send the documents you need or correct tax statement errors. Your tax documents must be available before the deadline to ensure you file your taxes in a timely manner.
Since you now have the option to file online, take advantage of the opportunity to file your tax retun right away. Once you file your tax return, it will be processed within 24 hours.
File an extension to prevent filing an amended return. The extension allows you to buy some time so you can deal with your tax statement. If you have enough time to check your tax statement, it will be easier for you to get your taxes filed correctly. This is a great option for those who cannot track down corrected tax forms. However, you still have to keep in mind that if you owe any tax, you will still have to pay the estimated balance on the required date.
Keep your penalty charges and extra fees to a minimum by paying as much of the tax balance as possible. You can also apply for an installment agreement to pay the remaining balance. If your application for installment agreement is approved, you will no longer have to worry about paying interest charges and excess fees.
Some business owners also choose to pay the tax balance with a credit card. This option saves time and money as you do not have to pay for high interest rates and fees that the ATO charges.
If you do not want to get caught by the same cycle of delayed tax payments, be sure to consider setting up a system for next year. A good tax system prevents delays and minimises stress. Timely filing of tax return gives you peace of mind as you no longer have to worry about paying for penalties.
If your business is taking shape, the next thing to think about to ensure that the business is in the right direction, is to keep records accurate and up-to-date.
Not only are these considered a legal requirement, but one of the good practices to follow so you can manage your business effectively. You should keep track of your expenses, sales, salaries and bank transactions. While this may really sound complicated for those who are starting a new business, it can be quite manageable once you develop good bookkeeping habits.
It might be tempting to do simple bookkeeping tasks yourself as this enables you to save money. However, if you want to achieve your long-term goals, it will be much wiser to consider hiring a bookkeeper.
There are bookkeeping tasks that can get more complicated than you think especially if it involves tax deductions. The ATO is very particular with the figures and inaccurate details can result in incurring penalties. If you are concerned about the cost of hiring a bookkeeping professional, think about the benefits.
You may not appreciate it at first , but as your business grows, you become busy as well taking care of other aspects of your business. This results in losing track of the financial aspect of your business. A bookkeeper ensures that your financials are in good shape by doing the following:
Checks your cash position
A bookkeeper checks if you have enough cash to grow your business or invest. They provide you a summary of your expenses so you will know whether or not you have enough to spend.
Prepares and sends invoices
Preparing invoices can take a large chunk of your time. Since it is a time-consuming process, you need someone to do these tasks for you so a steady flow of cash will come into your business.
Records your transactions
A bookkeeper is also responsible for recording transactions using bookkeeping software or an Excel. The transactions include money coming in from clients and money paid to suppliers, employees and others.
Review your cash flow
It is also important to check your cash flow position to ensure that you still have enough cash for the coming weeks or months. A bookkeeper takes care of this task.
A bookkeeper takes care of reviewing payment due dates, filing documents and receipts running your payroll, reviewing your incoming payments, checking your bank statements and much more. Hiring a bookkeeper creates peace of mind to business owners by allowing you to focus on other areas of your business.